Income Booms in Some Industries, but Many Workers Are Being Left Behind

Wages are booming in some of the hottest segments of the economy, but those gains are masking an otherwise bleak picture for American incomes five years after the recession ended.

Wages are growing in the U.S., if you are in one of the few industries that desperately need workers. For everybody else, wages are stuck in the mud. WSJ's Jonathan House joins MoneyBeat.

In Florida, plumber
Bobby Benson
just got a 15% raise as a surge in home building drives demand for skilled labor. Oil-services company
RPC Inc.
boosted wages by 15% to 20% in a year to lure workers to a small town in North Dakota.
Thomas Lyng,
a trucker in Buffalo, N.Y., earned 10% more last year amid a driver shortage.

Workers in these blue-collar, largely skilled fields are the outliers. They are able to command top pay because of shortages of qualified workers and, in some cases, a willingness to take demanding jobs in remote areas. Their income success contrasts with inflation-adjusted wages that rose just 1.1% in the 12 months through February, Labor Department data showed this week. The increase came from a 2.2% rise in hourly earnings for all employees, partially offset by a 1.1% increase in consumer prices.

Chances of the recovery kicking into a higher gear rest heavily on the ability of workers across more industries to secure wage gains. Stagnant incomes have restrained the American consumer for years, creating a vicious circle that has left businesses waiting for stronger spending before they rev up hiring and investment.

Trucker Thomas Lyng, 51, says well-paying jobs are there for those willing to follow the money.
Mike Bradley for The Wall Street Journal

"It's been a painfully long process of reparation," said
Morgan Stanley
economist
Ellen Zentner.
Falling unemployment eventually should spur broad-based wage gains, she said. "As time goes on, slack gets less and less and upward pressure on wages develops."

That already is happening in home building. The industry started rebounding in 2012 after shedding more than 465,000 people—almost half its workforce—between 2006 and 2011.

The rapid workforce decline has put a premium on the skills of those who are left. One of those left, Mr. Benson, said he is working six or seven days a week as construction of high-end homes booms again in Palm Beach County, Fla.

"It's a problem of supply and demand," the 54-year-old plumber said. "Nowadays it's hard to find knowledgeable guys." He said the 15% raise he got from his employer, Margate Plumbing Co., restored his pay back to its prerecession level of $25 an hour.

Throughout the recovery job creation has largely been driven by low-paying industries like retail and food services, which has also helped to keep lid on wage pressures. Average hourly earnings for all retail employees increased by 1.6% in the 12 months through February.

In the broader economy, labor-market slack remains and has shown few signs of letting up.

High unemployment throughout the recovery has held down wages across most of the economy. Year-over-year increases in average hourly earnings for all employees have hovered around 2%, before adjusting for inflation. That is down from the more than 3% growth recorded in 2007, just before the economy tipped into recession.

To be sure, there are some signs of upward wage pressure, which could boost economic growth. A narrower measure of wages for production and nonsupervisory employees, which captures about 80% of the private-sector workforce, has climbed for several months. It accelerated to a 2.5% annual gain in February from 2.3% in January.

If sustained, the increase would support the argument that wages are on the cusp of a broad-based surge.

Forecasters who are most bullish on the wage outlook argue February's 6.7% unemployment rate overstates the supply of available labor because many of these jobless people are long-term unemployed who are unlikely to find jobs.

Other economists believe the unemployment rate misses the millions of Americans who want full-time work but gave up looking or are stuck in part-time jobs. They attribute February's acceleration in wages, the largest improvement in nearly a year, to distortions driven by unusually cold weather. And even that uptick leaves wage growth at a modest pace, far below the 4% recorded at a similar point in the prior business cycle.

A survey of economists released last week by The Wall Street Journal shows forecasters expect the year-over-year increase in average hourly earnings for all employees to rise modestly to 2.4% in December from 2.2% in February.

Most Fed officials have indicated they see few signs of upward wage pressures. Though one gauge of wage growth "suggests some uptick," Ms. Yellen said Wednesday, "most measures of wage increase are running at very low levels."

But a debate is emerging within the Fed. "Broader concepts of the unemployment rate" suggested "considerable labor-market slack remained," several officials said at the central bank's January meeting, according to minutes of that gathering. Others warned of "worker shortages in specific regions and occupations" and "emerging labor-cost pressures" in one region.

Meanwhile, some workers continue to enjoy the benefits of the wage dichotomy.

RPC, the Atlanta-based oil-services company, has struggled to hire workers in some parts of the country. The company had to raise overall wages 15% to 20% last year to recruit mechanics and moving-equipment operators at remote locations such as Williston, N.D., said
Jim Landers,
RPC's vice president of corporate finance.

"You can make a lot of money working for us: $75,000 to $80,000 with a high-school diploma," Mr. Landers said. "But the work is physically difficult and the climate is bad. There just aren't many available workers."

An aging workforce also is driving labor shortages in some industries. Trucking-company executives say the median driver age in their industry is around 47, forcing them to adjust to waves of retirements. New federal limits on trucker hours, due to regulators' safety concerns, have exacerbated the problem by forcing companies to hire more drivers to transport the same amount of freight. As a result, competition is fierce for experienced truckers.

Mr. Lyng, the trucker in Buffalo, was briefly wooed away from his current employer,
Covenant Transportation Group Inc.,
with promises of higher pay by a competitor 2½ years ago. But he soon returned to Covenant for what he viewed as a better work environment and a lucrative retention program that offers annual bonuses and increases in per-mile rates for staying with the company.

He said his earnings have risen by more than 10% a year since he arrived, to about $56,000 last year. "If you keep moving, you'll make money," the 51-year-old said.